Omar Abdullah supported the introduction of transaction commissions via UPI

The central government issued clarifications regarding opposition accusations of foreign pressure in the decision to introduce a Merchant Discount Rate (MDR) for sellers within the UPI system. The Ministry of Finance emphasized that this decision was made solely at the domestic level and is not linked to any external influence. The goal of these policy decisions concerning UPI is to ensure the self-sufficiency, inclusivity, and accessibility of India's digital payment system.

The Ministry also assured the public that payments via UPI will remain free for ordinary consumers. A social media statement indicated that customers will not be charged a commission when sending money to friends or family, making purchases in stores, or scanning QR codes. According to the ministry, peer-to-peer transfers always remain free, regardless of the transaction amount.

Under the new scheme, starting October 15, an MDR rate of 0.4 percent will be applied to certain large seller transactions exceeding ₹2000. This charge will be borne by the merchant, not the customer. The maximum MDR limit per transaction is set at ₹300. The government stated that small entrepreneurs whose monthly income through UPI QR does not exceed ₹100,000 are exempt from any charges.

Payments to sellers amounting to less than ₹2000 will also retain their free status. The Ministry of Finance notes that over 95 percent of seller transactions are below ₹2000, so the new MDR system will not affect them. However, for essential services such as railways, fuel, telecommunications, bill payments, and insurance, a fixed charge of ₹5 will be imposed on transactions exceeding ₹2000. Furthermore, payments related to mutual funds and securities will be subject to an MDR of 0.02 percent with a maximum cap of ₹300.

The Ministry has directed banks not to pass on MDR costs to customers and has prohibited UPI applications from levying any additional platform fees.

The Ministry of Finance highlighted that UPI, launched in 2016, has become the world's largest real-time payment interaction system. In August 2026, 24.5 billion transactions were conducted via UPI. The government plans to use the resources generated from large seller transactions to strengthen the digital payment infrastructure and cybersecurity, making the UPI system more robust and resilient to new technologies. These funds will also be directed towards connecting small traders in Tier-3 to Tier-6 cities and rural areas, as well as raising awareness and promoting their use of UPI.

In response to this decision, the Congress party expressed doubts, arguing that it could give American card companies an advantage over UPI in competition. Rajya Sabha member Jairam Ramesh called it an attempt by Narendra to constantly appease Trump. He questioned why the 0.4 percent MDR rate was set and asked if it was related to the MDR applied to debit cards. Ramesh accused the government of abandoning the zero MDR policy for UPI under American pressure. To support his claims, he referenced previous criticism from the US Trade Representative (USTR) regarding UPI's free status.

Ashnir Grover, co-founder of BharatPe and former judge on Shark Tank India, spoke out against the debate over the Merchant Discount Rate (MDR) on UPI, proposing a new formula that caused widespread resonance. Simultaneously, the opposition is also criticizing the government regarding UPI.

Speculation arose after it became known about the possible introduction of MDR or a commission for UPI transactions exceeding 2000 rupees. The government issued a notification clarifying that banks or payment systems cannot charge fees for UPI transactions up to 2000 rupees or for payments made using RuPay debit cards. However, this notification lacks clear information regarding the charging of fees for UPI transactions exceeding 2000 rupees.

It was this gap in information that prompted Ashnir Grover to ask the government several sharp questions. He stated on the social network X that any commission for UPI is equivalent to tax collection. Although everyone acknowledges UPI as a significant achievement for India, it now risks becoming subject to taxation.

Grover noted that the RBI provides the government with a surplus of 2.87 lakh crore, and the profit of all registered banks amounts to 4.11 lakh crore. Furthermore, NPCI, the operator of UPI, has a surplus of 1.888 crore. He questioned the necessity of introducing MDR given such significant revenues for the government and banks, and asked what specific subsidy the government is trying to compensate through UPI.

He also pointed out that the cost of operating ATMs and cash logistics in India is 30,500 crore. Grover advised that if the goal is to optimize closed ATMs and promote UPI, they should simply close the ATMs and focus exclusively on UPI.

According to the new rules introduced on September 14, banks or payment applications are not entitled to charge direct or indirect fees for UPI transactions or RuPay debit cards up to 2000 rupees. An amendment was introduced to Section 10A of the Payments Act during the monsoon session of parliament, paving the way for the introduction of MDR on electronic payments. Now, the 'UPI and Services Management Committee', headed by NPCI, will determine the amount of the MDR commission to be charged.

The government argues that since UPI has become a very large system, funds are necessary for its secure operation. Processing a huge volume of transactions requires constant investment in cybersecurity and fraud prevention. The government believes that relying solely on government subsidies for the further expansion of UPI is impossible.